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History of Credit Cards - Invention of the Great Financial Tool

2008-10-07

Day by day, millions of customers all over the globe take advantage of small cards made of plastic. With these payment tools, they pay for products and services. Whatever you need to pay for - for the ride in taxi or for first-class airline tickets - credit cards will be of great use. Financial needs and wants of modern customers may differ greatly, but they all can be united with a single payment tool.

Plastic money has simplified our lives, but have you ever wondered how it was originated and whose idea it actually was? Read more about the history of credit cards!

These days, we don't necessarily need cash to pay for services and goods. The plastics we carry in our wallets come with a special number or even micro-chips that speed up the transaction. When accepting our plastic, the retailer may have no idea about our payment history and our credit habits, not to mention contract terms and conditions. The card transaction takes seconds. And it's definitely convenient for customers, as well as for merchants.

We get used to the idea that credit cards are made of plastic. However, back in the old days, there were made of various materials, including metal, fiber, cardboard, and paper.

It's a popular belief that first credit cards appeared during the 1920s in the United States. Hotel chains and gas companies started issuing them for their regular customers. Anyway, there can be found records of credit deals being made as far back as in the nineteenth century.

The best thing about early credit cards is that they provided the sales between a merchant and a customer, no third party was involved in the process. The downside was that they cannot be used in multiple locations. And it wasn't convenient at all.

The first bank card was invented by J.Biggins soon after the World War II. The "Charge-It" program enabled merchants to deposit sales slips to the bank and this bank in its turn billed buyers.

Only in 1950, Frank McNamara and his friend Ralph Schneider came up with a completely new scheme. The idea was to involve a third party between customers and merchants. The Diners' Club cards allowed paying with credit cards at any restaurant that accepted them. The process of card transaction was simplified but people had to pay back the entire sum in full. That's why charge cards require no interest to be paid, only an annual fee of $3 was charged.

Interestingly, but Diners' Club paid more attention to merchants as their targeted audience. Salesmen could boost their sales and profits through the customers' loyalty, but they had to pay a transaction fee of 7%, and they were not that happy about it.

In the early 60s, a few more companies entered the market, including Bank of America and American Express. They began advertising credit cards as a convenient financial tool that saved time and efforts rather than simply a source of credit.

Nowadays, there are many companies and institutions offering plastic money deals, not to mention contactless cards that win the hearts of consumers. More and more new plastics appear in the market and you need just to click on the "Apply" button to submit your application online.